A monopolistically competitive firm maximizes profits or minimizes losses in the short run by
A. Producing at the output level where MC equals ATC.
B. Producing at the output level where ATC is minimized.
C. Producing at the output level where MR equals MC.
D. Setting price equal to marginal cost.
Answer: C
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Which of the following helps to explain why the supply curve of labor is upward sloping?
A) The substitution effect of a price change makes a good more expensive relative to other goods. B) The supply curve of labor is a derived supply curve; since the output supply curve is upward-sloping so is the labor supply curve. C) As the wage rate rises, the income effect causes the quantity of labor supplied to increase. D) As the wage rate rises, the opportunity cost of leisure rises.
What is one reason activists might lobby the government for regulation limiting the production of a product to less than would normally be produced in a perfectly competitive market?
A) They value consumer surplus more than producer surplus. B) They value producer surplus more than consumer surplus. C) They seek to avoid future regulation. D) They seek to minimize total surplus.
Suppose there is an increase in the saving rate. This increase in the saving rate must cause an increase in consumption per capita in the long run when
A) capital per worker approaches the golden-rule level of capital per worker. B) the saving is used for education rather than physical capital. C) the rate of saving exceeds the rate of depreciation. D) there is no technological progress. E) technological progress depends on human capital.
In Figure 5.8, if the supply curve moves from S2 to S4,
A. the firm will make a smaller economic profit than they used to. B. the firm will go from making an economic profit to a loss but one that is not big enough to make it want to shutdown. C. the firm will go from making an economic profit to a loss that is big enough to make it want to shutdown. D. the firm will go from making an economic profit to a normal profit.